EU Grains Mostly Lower Despite French Win In Egyptian Tender

08/01/15 -- EU grains traded mostly lower, despite a clean sweep victory for French wheat in Egypt's first tender of 2015.

The day ended with Jan 15 London wheat down GBP1.60/tonne at GBP131.50/tonne; Soon to expire Jan 15 Paris wheat was down EUR5.00/tonne to EUR190.75/tonne; Mar 15 Paris corn was EUR1.25/tonne lower at EUR163.25/tonne; Feb 15 Paris rapeseed was EUR1.25/tonne firmer at EUR361.50/tonne.

Jan 15 Paris wheat goes off the board on Monday, and is displaying particular weakness in thin trade. It closed tonight at an EUR6.00/tonne discount to what will become the new front month, Mar 15.

The Bank of England left UK interest rates on hold at 0.5%, where they've now been since March 2009. UK inflation is reported to have fallen to a 12 year low of 1%.

In the eurozone, inflation has now turned negative, strengthening the case for the ECB to introduce more QE measures sooner rather than later.

The pound is therefore back in the familiar position of being up against the euro and down versus the dollar, with the US Fed now looking likely to be the first major central bank to raise interest rates in 2015.

Sterling has already declined 3.3% against the US currency in the first week of the year, with many analysts now forecasting a drop to the 1.40-1.43 region later in 2015. It currently stands at an 18-month low against the US unit, yet is close to a 36-month high versus the euro.

This should support Paris wheat more than the London market in the months ahead, and could also be construed as bearish for US wheat prices.

World ethanol prices are finally showing signs of cracking, following the astonishing slump in crude oil values witnessed in the last 6 months. It remains to be seen if the UK and EU bioethanol industries can ignore these developments for much longer, given that the price of their feedstock has increased significantly in the last few months.

Defra reported that 604 TMT of wheat was milled in the UK in the 4 weeks to Nov 22, 2014 - a 13% rise on a year ago. The proportion of home grown wheat used in the grist was 86%, a 2 1/2 year high.

Wheat usage in UK animal feed was up 5% year-on-year in November to 250 TMT, and barley usage fell 20% to 72 TMT.

Reuters reported that Algeria's recent wheat buying spree had actually amounted to around 900 TMT, which is far more than the 450-500 TMT originally reported.

Egypt's GASC tendering for wheat for Feb 8-18 shipment, booking 3 cargoes (180 TMT) of French wheat. Russian wheat wasn't offered, given that the delivery period falls after the introduction of their new minimum EUR35/tonne export duty.

Russian shippers say that they are better off carrying old crop into new crop rather than pay the "fine".

Ukraine wheat didn't feature either. There are now some reports circulating that the Ukraine government will cap wheat exports this year.